Is the Food and Drug Administration Safe and Effective?

Abstract

In the United States, the Food and Drug Administration (FDA) provides public oversight of the safety and efficacy of drugs; medical devices; biologics like vaccines and blood products; cosmetics; radiation-emitting electronic products; veterinary products; and all foods, except meat and poultry (which are regulated by the Department of Agriculture). According to the FDA, the products it regulates account for more than one-fifth of U.S. consumer spending. In the area of medical products, the FDA is responsible for determining whether marketed products are both safe and effective before and after they have been marketed. In this paper, we will explore whether the policies of the agency itself are safe and effective. We stress two issues, one static and one dynamic. The static issue concerns the potential duplication inefficiency when product safety is protected not only by the FDA but also by the private sector through product liability law. Put another way, what is the rationale for using product liability and the FDA to regulate drug safety? While intuitively it may seem that two systems must be better than one in ensuring drug safety, each system comes with costs. We then turn to the dynamic issue, the speed–safety trade off, and consider the extent to which higher safety is achieved at a cost of later market entry of effective and even life-saving products. We assess the Prescription Drug User Fee Acts (PDUFAs), which increased the speed of the agency's regulatory process starting in 1992, although according to some, at the cost of reducing drug safety. We conclude by suggesting a research agenda for future work on the Food and Drug Administration.

Economic Activity and the Value of Medical Innovation during a Pandemic

“…In doing so, innovation reduces the duration and severity of the direct health costs as well as the costs of economic shutdowns intended to mitigate the health costs. As long as it remains a major barrier to medical innovation, regulation will unnecessarily add to the economic and health costs of the current pandemic (Peltzman, 1973; Philipson & Sun, 2008).…”

Efficiency, Legitimacy, and the Administrative State

“…Phase I trials evaluate a drug's safety with small numbers of healthy volunteers, Phase II uses a slightly larger number of sick volunteers to establish a drug's efficacy and determine what constitutes a safe dosage of the drug to treat a disease, Phase III enrolls larger numbers of sick patients to try to reach definitive conclusions regarding efficacy and appropriate drug dosages. 28 After an application reporting the results of clinical trials is sent to the FDA, the FDA either approves or denies the company's application to sell the drug on the market.…”

The Effects of Product Liability Exemption in the Presence of the FDA

“…We consider an elasticity of 1.25, based on Philipson and Sun (2008). They utilize patent expiration evidence (Grabowski and Vernon 1992;Berndt, Cockburn, and Griliches 1996;Caves, Whinston, and Hurwitz 1991), which implicitly estimates the demand elasticity for drugs by from supply-induced price-reductions from patent expiry.…”